TOKYO -- The Bank of Japan scaled back purchases of exchange-traded funds and real estate investment trusts in 2019, a year in which the Japanese stock market's robust performance eased the need for support.
The BOJ bought 4.38 trillion yen ($40.3 billion) of ETFs, roughly 30% short of the targeted 6 trillion yen or so. REIT purchases totaled 52.8 billion yen, about 40% below the target.
The cuts to the BOJ's stock-buying show how the central bank walks a delicate line between its goal of spurring inflation and the risk of undermining corporate governance.
But if the bank's buying falls far from the targets, "investors will stop trusting information from the BOJ, eroding effects of its policy," warned Koichi Fujishiro of the Dai-ichi Life Research Institute.
Investors had come to expect big blasts of monetary stimulus from BOJ Gov. Haruhiko Kuroda -- so much so that they were likened to shots from a bazooka. But the bank had said in July 2018 that it might tweak purchases under its unprecedented asset-buying program, depending on market conditions, hinting at a readiness to cut back.
The warning came amid growing concerns that its index-linked buying would erode healthy price formation and undermine shareholder oversight. The BOJ's ETF purchases put it on track to surpass the Government Pension Investment Fund as the biggest holder of Japanese stocks and made the central bank the top shareholder of a number of blue chips.
Slowing asset purchases also shows a nod to the risk of market downturns.
The BOJ also has a massive bond-buying program, and it has experimented with negative interest rates. Yet consumer price growth remains stubbornly below the bank's 2% target.
2019 saw rallies in both Japanese equities and REITs. The Nikkei Stock Average and the Tokyo Stock Exchange's REIT Index each advanced roughly 20%.
When it comes to REIT buying, the BOJ "should square this with its 2% inflation target and explore ways to sell off the assets while it has time," said Hiroshi Torii, an analyst at SMBC Nikko Securities.